- The Consumer Financial Protection Bureau (CFPB) proposed new rules Thursday that would help customers move their their money between bank accounts.
- The government watchdog agency said the rules would help improve competition between banks, improving customer service and interest rates offered on deposits.
- Institutions in the banking industry said the rules must ensure customers’ data privacy.
It’s about to get a lot easier to break up with your bank or credit card.
The Consumer Financial Protection Bureau (CFPB), the government’s consumer watchdog agency, proposed new rules Thursday that would require banks to share data at the customer’s request, making it easier to switch banks and other financial service providers. The rules allow you to take your data—including things like transaction histories—with you.
The rules are intended to make banks compete more for customers by offering better rates and service, CFPB director Rohit Chopra said in a press conference. Currently, it’s difficult for customers to switch accounts because doing so means losing important data such as transaction histories, Chopra said. He compared the situation to the early days of cell phones when switching providers meant losing your phone number.
“Firms have learned that they don’t need to provide great rates or customer service for a sustained period of time,” Chopra said. “Instead, they can attract customers with teaser rates, change them whenever they want, and make it really bureaucratically difficult to switch.”
For example, most bank customers receive low interest rates on their deposits, with the national average annual returns for a savings account being just 0.46% according to data from the Federal Deposit Insurance Corporation (FDIC), despite the fact that interest rates are high. However, some banks are offering returns as high as 5.40% to entice customers.
“On average, Americans have had the same checking account for 17 years,” Chopra said. “If switching were easier, Americans could earn billions of dollars more in interest each year.”
The proposed rule would make switching easier in several ways. Banks and other financial service providers would have to make data available to customers free of fees. Customers would also have a legal right to grant third parties—such as a competing institution—access to information from their accounts.
It also sets new standards for data security and prevents companies from using customer data for their own purposes such as selling it to a data broker or training artificial intelligence.
“People can become trapped by providers that hold their data, but this proposal would allow them to more easily shift their data to a competitor offering better or lower priced products and services,” the CFPB said in a statement.
A group representing the banking industry—which is often at odds with CFPB regulators—came out in support of the new rules.
“Put simply: customers must have transparency and control over their data,” the Bank Policy Institute said in a statement.
The rules, if finalized, would go into effect two months after being published. The CFPB is accepting public comments on the proposed rules through Dec. 29.